Buzz
Anyone who has purchased a home eventually discovers that there are several unexpected costs of owning a house, such as surprise repairs, insurance, and taxes. Whether these expenses take you by surprise largely depends on how extensively you research before purchasing. As CNBC reports, 33% of new homeowners in a 2023 survey found that their property taxes were higher than anticipated.
Property taxes are an unavoidable reality, but you don't have to be caught off guard. Here's what you need to know to prepare for your tax bill—particularly if you're buying a newly built home.
Start by educating yourself early on.
Whether you're purchasing a brand-new home or one that's been around for a while, it's important to gather as much information as possible about the full cost of ownership—everything from property taxes to insurance and HOA fees—rather than just focusing on the asking price.
Valerie Saunders, president of the National Association of Mortgage Brokers, suggests consulting a range of professionals, including your realtor, attorney, loan officer, and mortgage broker. They can provide valuable insights into factors like the local market and how property appraisals are handled in your area.
"With so much information available to us today, there's no excuse for not doing your research," she emphasizes.
Saunders also points out that you can access public property data through your county’s tax assessor or property appraiser. Simply visit your county's website and search for your lot (you may need your tax ID number from the sales contract) to view the latest assessment. For new developments, this may reflect only the land, meaning property taxes could rise once your home is added to the appraisal.
Check out what your neighbors are paying in property taxes.
If you're settling into a neighborhood or new development where nearby homes have been around for at least a year, check your county’s data to see how much your neighbors are paying in property taxes. While this won't necessarily match your future tax bill—especially if your home differs in size, features, or lot size—it will provide a useful baseline for what to expect.
You'll also want to gather details about other ongoing costs that could add to your monthly expenses, like HOA fees, recycling, and wastewater management.
Set aside funds for a larger tax bill.
Saunders advises having a strategy in place for handling a potential tax hike, whether that means using your income tax refund or consistently saving a portion of your income each month.
Typically, you’ll place estimated property taxes into an escrow account when purchasing your home. However, if your taxes are based on land value alone at the time of closing, the next assessment is likely to be higher, potentially resulting in an escrow shortage. If this happens, you’ll need to repay your lender to cover the difference.
If you don't have a lump sum saved up already, try calculating the worst-case scenario (how much you expect your taxes to increase), divide that figure by 12, and set aside that amount each month in preparation for a higher payment. Also, avoid spending your savings on non-essential home upgrades or purchases if you anticipate an increase in taxes.
Learn about how your county handles tax assessments.
Although each county may have its own tax assessment process, most counties reassess properties annually. Knowing the dates and deadlines for this process can help you prepare for possible increases and take steps to reduce your tax bill.
For instance, any permanent additions to your property will increase its assessed value, so contact your county office to get an estimate for the value before you build (you might want to delay construction until after the next reassessment). You might also be eligible for exemptions that could reduce your tax liability.
